Boston Scientific profitable but product sales fall

CarolynPritchard

SAN FRANCISCO (MarketWatch) -- Boston Scientific Corp. said it reversed a year-ago quarterly loss that was due to a settlement-related charge, but sales of its flagship Taxus drug-coated coronary stent and its implantable defibrillators came in lower on both a sequential and year-over-year basis.

Shares were up 5% at $15.90 in Thursday morning trading.

After the closing bell on Wednesday, Natick, Mass.-based Boston Scientific
BSX, +1.07%
reported net income of $76 million, or 5 cents a share, on revenue of $2.03 billion for the quarter ended Sept. 30. In the same period last year, the medical device maker lost $269 million, or 33 cents a share, on revenue of $1.51 billion. The year-ago results included after-tax special charges of $616 million, primarily for the company's $598 million legal settlement with Israeli stent maker Medinol.

Excluding charges in the latest quarter, including those associated with the acquisition of Guidant Corp., the medical device maker would have reported adjusted earnings per share of 20 cents.

This year's quarter was based on 1.49 billion shares outstanding, compared with 819.9 million shares last year.

A poll of analysts by Thomson First Call had estimated the company would report revenue of $2.02 billion.

In order to make the Guidant deal more palatable to antitrust regulators, Boston Scientific agreed to sell Guidant's coronary stent and vascular business to rival Abbott for $4.1 billion. In addition, Abbott also loaned Boston Scientific $900 million for the deal and agreed to purchase $1.4 billion of Boston Scientific's common stock.

In the third quarter, worldwide sales of Boston Scientific's flagship product the Taxus drug-coated coronary stent fell to $572 million from $647 million in the second quarter and $601 million in the third quarter of 2005. U.S. Taxus stent sales fell to $384 million from $429 million sequentially and from $404 million the year before.

Stents are small mesh tubes inserted into arteries after such procedures as angioplasty to keep them propped open. Often the stents are coated with a drug to discourage the formation of scar tissue in the artery. However, drug-coated stents have come under greater scrutiny by doctors recently amid reports that they can encourage the development of blood clots in certain patients.

Boston Scientific also reported worldwide CRM sales in the quarter of $446 million, including $315 million of implantable cardioverter defibrillator sales and pacemaker sales of $131 million, down from $484 million the year before. In the U.S., third-quarter CRM sales fell 10.5% year-over-year to $296 million, including $221 million of ICD sales and pacemaker sales of $75 million.

For the second quarter, on a pro forma basis as though Boston Scientific had acquired Guidant on April 1 worldwide CRM sales came in at $529 million, including $383 million of ICD and pacemaker sales of $146 million. Second-quarter U.S. ICD sales were $273 million and U.S. pacemaker sales were $81 million.

Device sales have been under considerable pressure in recent months following several high-profile recalls of Guidant products and an unexpected slow-down in the general market.

Stent competitor Johnson & Johnson posted its quarterly earnings on Oct. 17, also noting a slow-down in the drug-coated stent market. See full story.

Boston Scientific also said on a conference call that the Food and Drug Administration's warning letter regarding its quality controls could be lifted sometime at the end of the second quarter or the start of the third quarter. The letter has held up the approval of the company's latest stent.

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